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Crisis-hit bankers seek divorce relief
By Caroline Alexander |
April 5, 2009, Sunday
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BANKERS and other high earners in the United Kingdom are asking to reduce their divorce settlements as the financial crisis shrinks their net worth, according to five family-law attorneys.
Brian Myerson, former chief executive officer of Principle Capital Holdings SA, will learn soon if a London appeals court will alter the terms of his divorce, according to the court calendar. Myerson is seeking to lower the lump sum of about 11.2 million pounds (US$16 million) he agreed to pay his wife last year when they ended their 26-year marriage. The value of his share of the settlement dropped to 1.17 million pounds within 10 months.
"He made a commercial decision to put his money on red, and the spin of the roulette wheel came out black," said Julian Lipson, family-law practice group leader at Withers LLP in London, who isn't involved in the case. "The judges may feel sorry for him, and it was an unfair transaction, but it was a decision he took."
Renegotiating
While Myerson will have a hard time winning, other high net worth individuals are having more luck renegotiating alimony payments out of court, the five family-law attorneys said. Lipson said his firm received three times as many inquiries as it would normally get in a year between November and December.
The trend is being fanned by more than 100,000 job cuts in the European finance industry and bonuses dropping 60 percent since the crisis began, according to the London-based Center for Economics and Business.
If you are acting for someone who was earning 800,000 pounds and now earns 150,000 pounds, "you have a pretty good case for downward variation, and the lawyer of the wife would advise to negotiate," said Jane Craig, family partner at Manches LLP in London.
England became one of the most lucrative jurisdictions in the world for high net worth divorces in 2006. Two landmark rulings entitled a spouse to a share of a former partner's lifetime earnings, and allowed settlements to reflect a spouse's expectation of a wealthy lifestyle. Beverly Charman, ex-wife of Bermuda-based Axis Capital Holdings CEO John Charman, won a record divorce award of 48 million pounds in 2006. She had argued that she needed 700,000 pounds a year to live in the manner she had become accustomed to over 27 years of marriage.
Lipson said he began noticing an increase in requests to change alimony payments late last year. In better times, such appeals were rare because they didn't justify the legal fees, he said.
Changing times
"In previous years, husbands tended to make applications because the wife had got a boyfriend, was living with someone or had started working," said Simon Pigott, a partner at Levison Meltzer Pigott in London.
"It was uncommon that they made an application for downward variation because their incomes had fallen off the face of a cliff."
If successful, the Myerson ruling could open the floodgates for similar appeals, the lawyers said. All five said that he faces an uphill struggle to change a settlement he agreed to.
"Courts are busy enough as it is without dealing with cases retrospectively, and they are also very concerned about ensuring there is as much finality as possible in each case," said Ann Ison, partner at Hughes Fowler Carruthers in London. When the Myersons divorced in February 2008, Brian Myerson opted to give his ex-wife, Ingrid, 9.5 million pounds and a 1.5-million-pound beach house in South Africa, documents submitted to the Court of Appeals show.
He was to keep the shares in his company, a London-based group of investment funds. The deal would have given Myerson 57 percent of the couple's total wealth of 25.8 million pounds, versus 43 percent for Ingrid Myerson.
Myerson, 50, will be forced into negative equity of 500,000 pounds, while his wife will take 100 percent of the couple's assets if he pays her all the money she's due, Myerson's lawyer, Martin Pointer, told the Court of Appeals on March 11.
Myerson was ousted last week by Principle shareholders, who also voted to liquidate the fund. Shares of Principle have fallen 76 percent this year. Ingrid Myerson's lawyers argued in court filings that Myerson's stock portfolio could rise in value.
Myerson's case hinges on whether he can prove the financial crisis was an extraordinary event no one saw coming, according to Ison, who isn't involved in the case. British family law holds that alimony is negotiable, while lump-sum payments, or capital orders, are final except in the event of an unforeseeable circumstance.
The recession is affecting how divorces are settled, and few couples are following the Myerson approach, in which Brian took all the risky assets, Craig said.
"There's much more of a tendency of spreading the risk by allocating assets proportionately," she said. "People aren't putting all their eggs in one basket anymore."
Brian Myerson, former chief executive officer of Principle Capital Holdings SA, will learn soon if a London appeals court will alter the terms of his divorce, according to the court calendar. Myerson is seeking to lower the lump sum of about 11.2 million pounds (US$16 million) he agreed to pay his wife last year when they ended their 26-year marriage. The value of his share of the settlement dropped to 1.17 million pounds within 10 months.
"He made a commercial decision to put his money on red, and the spin of the roulette wheel came out black," said Julian Lipson, family-law practice group leader at Withers LLP in London, who isn't involved in the case. "The judges may feel sorry for him, and it was an unfair transaction, but it was a decision he took."
Renegotiating
While Myerson will have a hard time winning, other high net worth individuals are having more luck renegotiating alimony payments out of court, the five family-law attorneys said. Lipson said his firm received three times as many inquiries as it would normally get in a year between November and December.
The trend is being fanned by more than 100,000 job cuts in the European finance industry and bonuses dropping 60 percent since the crisis began, according to the London-based Center for Economics and Business.
If you are acting for someone who was earning 800,000 pounds and now earns 150,000 pounds, "you have a pretty good case for downward variation, and the lawyer of the wife would advise to negotiate," said Jane Craig, family partner at Manches LLP in London.
England became one of the most lucrative jurisdictions in the world for high net worth divorces in 2006. Two landmark rulings entitled a spouse to a share of a former partner's lifetime earnings, and allowed settlements to reflect a spouse's expectation of a wealthy lifestyle. Beverly Charman, ex-wife of Bermuda-based Axis Capital Holdings CEO John Charman, won a record divorce award of 48 million pounds in 2006. She had argued that she needed 700,000 pounds a year to live in the manner she had become accustomed to over 27 years of marriage.
Lipson said he began noticing an increase in requests to change alimony payments late last year. In better times, such appeals were rare because they didn't justify the legal fees, he said.
Changing times
"In previous years, husbands tended to make applications because the wife had got a boyfriend, was living with someone or had started working," said Simon Pigott, a partner at Levison Meltzer Pigott in London.
"It was uncommon that they made an application for downward variation because their incomes had fallen off the face of a cliff."
If successful, the Myerson ruling could open the floodgates for similar appeals, the lawyers said. All five said that he faces an uphill struggle to change a settlement he agreed to.
"Courts are busy enough as it is without dealing with cases retrospectively, and they are also very concerned about ensuring there is as much finality as possible in each case," said Ann Ison, partner at Hughes Fowler Carruthers in London. When the Myersons divorced in February 2008, Brian Myerson opted to give his ex-wife, Ingrid, 9.5 million pounds and a 1.5-million-pound beach house in South Africa, documents submitted to the Court of Appeals show.
He was to keep the shares in his company, a London-based group of investment funds. The deal would have given Myerson 57 percent of the couple's total wealth of 25.8 million pounds, versus 43 percent for Ingrid Myerson.
Myerson, 50, will be forced into negative equity of 500,000 pounds, while his wife will take 100 percent of the couple's assets if he pays her all the money she's due, Myerson's lawyer, Martin Pointer, told the Court of Appeals on March 11.
Myerson was ousted last week by Principle shareholders, who also voted to liquidate the fund. Shares of Principle have fallen 76 percent this year. Ingrid Myerson's lawyers argued in court filings that Myerson's stock portfolio could rise in value.
Myerson's case hinges on whether he can prove the financial crisis was an extraordinary event no one saw coming, according to Ison, who isn't involved in the case. British family law holds that alimony is negotiable, while lump-sum payments, or capital orders, are final except in the event of an unforeseeable circumstance.
The recession is affecting how divorces are settled, and few couples are following the Myerson approach, in which Brian took all the risky assets, Craig said.
"There's much more of a tendency of spreading the risk by allocating assets proportionately," she said. "People aren't putting all their eggs in one basket anymore."
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